ITT Corporation (ITT) released its third quarter earnings result before the market opened today, reporting earnings per share from continuing operations of $1.08 and outperforming the Zacks Consensus Estimate of 99 cents.

Earnings were up 6% year over year. Increased revenue from commercial business and operating efficiency of the company were the driving factors for good results in the quarter.

Revenue

Total revenue was $2.68 billion, up from $2.55 billion in the third quarter of 2009. The quarterly revenue was slightly below the Zacks Consensus Estimate of $2.69 billion.

Defense & Information Solutions revenue declined by 9% to $1.4 billion, led by decreased sale of counter improvised explosive device units and tactical radios, weak software engineering services revenue and low shipments of night vision goggles. This was partially offset by growth in special purpose jammers, radar and composite structures.

The segment also benefited from improved activity under the Automatic Dependent Surveillance-Broadcast (ADS-B) air-traffic control program. Though a decline in revenue was a bit discouraging, this was overshadowed by 100% sequential rise in order, which also surged 25% on a year-over-year basis.

Fluid Technology revenue was $920 million, up 3% organically, driven by worldwide growth in municipal market, good performance in North American residential market and growth in the emerging markets. Orders in the quarter spiked 5%.

Motion and Flow Control revenue increased organically by 22% to $360 million, led by improved auto, connectors and general industrial markets. Emerging markets also contributed significantly to segment growth. Orders increased by 20%.

Income & Expense

Operating loss was $32 million in the quarter compared with a profit of $89 million in the prior-year period. Operating loss in the quarter was primarily due to high SG&A expense ($396 million) and asbestos-related costs ($341 million).

Segment wise, operating income was up 11% in Defense & Information Solutions, 7% in Fluid Technology and 13% in Motion & Flow Control.

Balance Sheet

Cash and cash equivalents was $912 million at the end of the quarter, with long-term debt of $1.4 billion and shareowner’s equity of $4.3 billion.

Cash from operations was $654 million year-to-date and free cash flow was $480 million.

Outlook

Better-than-expected third quarter results led the company to increase its 2010 adjusted earnings per share guidance range to $4.28 – $4.32 from its prior expectation of $4.08 – $4.18. Revenue is expected to grow approximately 4% to $11 billion. Organic growth is expected to be 2%.

ITT plays an important role in vital markets, including water and fluids management, global defense and security, and motion and flow control. It possesses leading brands in the Fluid Technology and Motion & Flow Control businesses. The company is well diversified and serves attractive end markets with a broad geographic footprint.

However, adverse macroeconomic and business conditions, particularly in the local economies of the countries or regions, where the company operates, may negatively affect its revenues, profitability and operations.

The company’s Defense Electronics and Services segment develops, manufactures and supports high-technology electronic systems and components for worldwide defense and commercial markets, and provides communications systems and engineering and applied research. Principal manufacturing facilities are located in the United Kingdomand the US.

ITT Corporation is a global multi-industry leader in high-technology engineering and manufacturing. It is engaged in the design, manufacture, and sale of a wide-range of engineered products and the provision of services. Major competitors of ITT are Lockheed Martin Corporation (LMT) and Raytheon Co. (RTN).

We currently maintain our Neutral rating on ITT Corporation, with a Zacks #3 Rank over the next one-to-three months.

 
ITT CORP (ITT): Free Stock Analysis Report
 
Zacks Investment Research